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Government affordable home ownership schemes: What are the options?

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If you’re looking to buy a property, whether as a first time buyer or a home mover, there are a number of Government backed schemes available. It can sometimes be confusing as to what applies to which type of buyer and which properties. This guide provides you with all the essential information about affordable home ownership schemes in England and how you can qualify.

Help to Buy equity loans

This scheme helps both first time buyers and those wanting to move or purchase a new build property. In order to qualify for it you must have at least a 5% deposit. The Government will then loan you up to 20% of the value of the property and you’ll need a mortgage for the remaining 75%. This applies to properties worth up to £600,000 and you can’t sub-let any part of it if you buy a house under this scheme.

For the first five years of the loan you won’t be charged any fees. After this a fee of 1.75% of the value of the loan will be charged in the sixth year. The fee will then increase in line with the Retail Prices Index measure of inflation plus 1%. Any fees you pay won’t be classified as paying back part of the loan.

Government affordable homes scheme

If you buy a property using this scheme, you’re able to sell it whenever you want. You’ll need to pay back the loan when you sell the house or when the mortgage period ends if this happens first. You can pay back a percentage of the loan at any point, either 10% or 20%, as long as the loan covers at least 10% of the property’s value.

To buy a property using an equity loan, you need to apply through a local Help to Buy agent.

Shared Ownership Schemes

These schemes are run by Housing Associations and allow you to buy between 25% and 75% of a property with a mortgage and pay rent to cover the rest. To qualify for this scheme you must:

– Have an annual household income of under £60,000

– Be a first time buyer or have owned a home before but no longer be able to afford one

– Rent through a council or housing association

Different criteria will apply to those over the age of 55 and people with long-term disabilities.

If you’ve bought a share of the property, you can buy additional shares at any point. The cost of this will be based on the value of the property at the time, not on the price of the initial shares. When you own 100% of the property, you can sell it whenever you want. However, the housing association will have first refusal on buying it back for 21 years. If you don’t own the property outright, the housing association can find a buyer if you want to sell.

To apply for this scheme you need to contact a local Help to Buy agent.

NewBuy

Both first time buyers and home movers can buy a new build property through this scheme with just a 5% deposit. The NewBuy scheme can be used if:

– It’s a new build property from a registered builder

– The property is valued at £500,000 or less

– This is your main home

– You purchase it outright, not through a shared ownership agreement

– You’re a UK citizen or have the right to remain indefinitely in the country

There are no income restrictions with this scheme. However, you must apply for a mortgage through an approved lender and you need to meet the standard mortgage criteria. Firstly you need to check if there are any NewBuy builders selling properties in your area and each builder will have a partnership with one or more of the approved mortgage providers.

Help to Buy mortgage guarantees

This is a new scheme that will come into effect from 1st January 2014. It will enable first time buyers and those moving house to buy any property worth less than £600,000 by putting down a 5% deposit. The scheme will apply to existing houses, as well as new build properties, as long as they‘re not part of a shared ownership or shared equity agreement. There will be no income limits when applying for the guarantees. Further information on how to apply will be available later in 2013.

 

 

 

 

 

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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